Higher savings rates have multiplier effects that can cause higher output per capita and ultimately boost economy. When individuals save more money than they consume, they are able to invest more and therefore increase economic output, increasing economic output per capita in the long run. Economies with people with higher propensity to save have higher productivity and are more economically successful than economies that have low propensity to save.
Rising levels of output per capital could be caused by higher saving rate. On the long-run, when the saving rate in an economy is high, there will be more money for capital investments which will result in an increased productivity, that is increased output per capital. Banks will have more money to loan out to firms for huge capital investment which will result in increased productivity.
On the contrary, lower saving rate will result in unavailability of funds for capital investments which can propel economic growth and thus reduce output per capital in the long-run.
